All 7 markets end Feb in green

Despite the drop among the world’s oil prices and earnings of numerous companies falling below expectations, all seven equity markets in the GCC region ended the month on a positive note on the back of further companies’ earnings and dividend announcements and positive investor sentiment throughout the month. Led by the gains registered by the market heavyweight Services sector, Kuwait Stock Exchange, which is represented through KAMCO TRW Index, gained 9.57% thus ending the month as the best performing market in the GCC region. Out of the total 626 listed stocks in the seven GCC equity markets, 358 companies announced their FY-09 earnings by the end of February. Excluding the financial results announced by Kingdom Holding Co. which incurred massive losses of SAR 30 billion in FY-08, the aggregate profit for the seven markets totaled USD 32.87 billion, down by 18.11% from last year’s aggregate profit of USD 40.14 billion. Dubai Financial Market witnessed the largest hit in its 2009 earnings as it registered a 47.49% drop from its FY-08 earnings as uncertainties regarding state-owned Dubai World’s restructuring plans continue to hinder the market’s overall performance. Nonetheless, despite rising non-performing loans in addition to the booking of additional provisions by banks, renewed investor optimism over the performance of GCC banks and companies alike prevailed throughout the month. As investors believe that markets’ performance is bound to improve in 2010 as the worst of the financial crisis is over and its impact has already been factored in FY-09 results. Consequently, GCC Equity Markets ended the second month of the year 2010 on a positive note with all seven markets ending in green, led KSE – KAMCO TRW Index, the QE 20 Index, and Tadawul All Share Index which recorded monthly gains of 9.57%, 4.79%, and 2.96% respectively.
The GCC markets are expected to be in line for a catch-up during 2010, once the shock of Dubai’s debt restructuring abates. Most GCC economies are expected to recover during 2010, after the global financial crisis froze credit in the world’s top oil producing region last year, with Qatar and Saudi Arabia’s expectations to outperform their neighbors while the UAE is seen lagging due to its debt and leverage concerns. Despite that, risks from rising defaults and non-performing loans is still present and is expected to hamper on the profitability of the banking sector during 2010.
FY-09 corporate earnings announced so far have shown weak financial performance, mainly driven by provisions charged against credit losses and impairment in the value of investments due to the deterioration in financial asset and property prices. Excluding the Kingdom Holding Co results which incurred massive losses of SAR 30 billion in FY-08, the combined FY-09 net profit for 358 companies out of the 626 companies listed on the GCC equity markets reached USD 32.87 billion, down 18.11% from last year’s aggregate profit of USD 40.14 billion.
In Saudi Arabia, Tadawul All Share Index (TASI) maintained its previous month upward trend to gain 2.96% and close at 6,437.50, thereby ending as the third best performer amongst its GCC peers. The rise can be mainly attributed to the gains recorded on the market heavyweight Banking sector, which witnessed its market cap increase 3.45% over renewed investor optimism that the performance of local banks is set to improve in 2010 despite rising non performing loans coupled with the booking of additional provisions by banks in 2009 which amounted to SAR 11.4 billion. Market heavyweight Petrochemical sector, on the other hand, witnessed its total market cap rise 3.00% amid renewed investor confidence that the recovery in global economies coupled with demand from China would underpin a profit recovery in 2010. Total market capitalization at the end of Feb-10 reached SAR 1.27 trillion, up 2.4% as compared to the previous month. Gains recorded during the month enabled the TASI YTD-10 gains to rise to 5.16% and thereby end as the second best performer in the GCC region. 
Kuwait Stock Exchange
In Kuwait, the KAMCO TRW Index bucked its previous five month downward trend to gain 9.57% to end at its highest monthly close since Sep-09 at 2,684.52 points. Parliament approval of a KD 30 billion four year economic development plan coupled with the CBK discount rate cut boosted investor sentiments during the month. Also, market heavyweight ZAIN’s announcement that it has received an offer for its African operations, excluding Morocco and Sudan, for USD 10.7 billion from India’s largest mobile operator Bharti Airtel added to the positive sentiments during the month. As a result, ZAIN, which dominated the course of trade on the KSE since Sep-09, witnessed its share price surge 40.7% to close at KD 1.280. Total market capitalization, during the month, surged 13.22% to KD 33.42 billion (USD 116.7 billion). Gains recorded during the month witnessed the KSE end as the best performing market in the GCC region.
Dubai Financial Market
In Dubai, the lack of transparency regarding the scale and scope of the debt restructuring plans and the intended course of action by Dubai World (DW) and its lenders contributed to the negative market sentiment this month hindering the index performance as Dubai Financial Market ended the month with a minimal gain of 0.18% to close the month at 1,592.91 points. The lack of information about Dubai’s debt issue, rumors about a settlement deal where DW only pays 60% of its loans to lenders and a weaker earnings season weighed down on the market performance during the month. During 2009, Dubai’s consumer prices fell sharply as the collapse in the housing market and falling food costs led the Emirate to witness its lowest inflation rate in five years. According to the Dubai Statistics Centre, Dubai’s inflation rate stood at 4.1% in 2009 as compared with 11.3% in 2008. The Dubai Statistical Centre also released data that confirms that Dubai’s government sector contributed significantly to GDP growth in the third quarter of 2009. While real GDP contracted by 4.1% during the same quarter as compared with the comparable period in 2008, the government sector rose by 11.4% during the period. In terms of Dubai’s budget, the Government of Dubai has started to cut its spending in an effort to swing its budget deficit to a surplus by 2011.
Abu Dhabi Securities Exchange
In Abu Dhabi, led by the healthy gains recorded on the market heavyweight Telecommunication Sector, the ADX General Index gained 70.19 points or 2.67% during February to close at 2,703.56 points. However, the progress of the ADX General Index was hampered by the losses incurred in the Real Estate Sector. Thereby, the ADX ended the month as the fifth best performing market amongst its peers in the GCC region. The market witnessed low volatility accompanied by falling volume and value traded during the month. The ADX General Index witnessed a positive performance during the first three weeks of trading, gaining 5.06%, on the back of healthy earning announcements and the positive news regarding Emirates Telecom planned expansion across the MENA region. However, during the last trading week the ADX General Index declined by 2.28% as weak earnings from the Real Estate sector and rising speculation that Dubai World’s property arm Nakheel’s USD 980 million Sukuk maturing on May 13th are unlikely to be repaid weighed down on the market’s performance. Nonetheless, the Index ended the month on a positive note after registering a 2.67% gain.
Qatar Exchange
Following along, driven by investor’s buying activities ahead of companies’ earnings and dividend announcements, the QE 20 Index ended the month on a positive note after adding 314.37 points and closing at 6,872.82 points, representing a 4.79% gain from January’s close. Despite the drop witnessed in the world’s average oil prices during the second trading week of the month and numerous companies’ earnings falling below expectations, investor sentiment remained upbeat throughout the month. Of the total 20 trading sessions during the month, 15 closed out on a positive note with the remaining ending on a negative note. Accordingly, total market capitalization for the month rose 4.20% to reach QAR 382.7 billion (USD 105.1 billion) in comparison to Jan-10 market cap of QAR 367.3 billion (USD 100.9 billion).
Bahrain Stock Exchange
In Bahrain, the BSE All share Index maintained its previous month upward trend and rose by 2.69% to close the month of February at 1,518.06 points. This gain can be attributed to the better than expected earnings announcements by a majority of the listed banks coupled with the proposed new regulations brought forward by the Central Bank of Bahrain (CBB), which aim to tighten banks’ credit and assets exposures. Gains recorded during the month enabled the BSE All Share Index YTD-10 gain to stand at 4.10%, hence enabling the Bahrain Stock Exchange to end as the fourth best performing market since the beginning of the year among its peers in the GCC region.
Muscat Securities Market
In Oman, the MSM 30 Index continued to gain for the second consecutive month as it added 2.41% supported by better than estimated earnings for the aggregate market which increased 3.7% to OMR 402 million in FY-09. This came alongside economic data that showed that the Sultanate had booked a budget deficit of OMR 22.1 million (USD 57.4 million) in 2009, which was less than prior estimates of a deficit totaling OMR 810 million. Total market capitalization rose by OMR 150 million (USD 392 million) to end the month at around OMR 6.55 billion (USD 17.01 billion), adding 2.36% at the end of February where market heavyweight Banking & Investment sector, added 2.01% to its market cap to reach a total value of OMR 3.26 billion (USD 8.46 billion).
The combined market capitalizations of the 7 GCC bourses increased by 4.18% or USD 29.2 billion to record USD 728.9 billion at the end of Feb-10 compared to USD 699.7 billion in Jan-10. Saudi Stock Exchange, which accounts for around 46.5% of the aggregate market capitalization of the GCC bourses, gained around USD 8.0 billion for the month while Kuwait Stock Exchange, the second largest stock market, recorded gains of around USD 13.6 billion over the same period.

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